NEW YORK, United States — The beauty world is increasingly divided between brands that will sell on Amazon, and brands that still shun the platform.
The e-commerce giant was good enough for Lady Gaga, who launched her brand, Haus Laboratories, exclusively on Amazon last summer. Her products shot up the bestseller list upon release, and the brand’s liquid eyeliner is still the site’s number two bestseller in that category. Amazon’s Luxury Beauty shop carries around 350 brands, including Sunday Riley, Molton Brown and hair tool brand T3 Micro.
But many popular brands, from Estée Lauder to Chanel, refuse to sell there. They worry about competing against unscrupulous third-party sellers peddling expired or fake products on Amazon’s free-for-all marketplace, preferring the more controlled environment of the department store beauty counter or Sephora display.
The holdouts are growing fewer by the day. Amazon has been quietly stealing market share in the beauty category. While teens still prefer shopping at stores like Ulta and Target, Amazon jumped to the number five spot for favourite beauty shopping destinations in Piper Jaffray’s fall 2019 survey of American teenagers, up from 17th place the year prior.
I don't think there's a brand out there that doesn't have that conversation.
Like sellers of books and gadgets before them, beauty brands face growing pressure to put their reservations aside and follow their customers.
“I don't think there's a brand out there that doesn't have that conversation,” said Amy Fisher, chief marketing officer at Stila, which has sold on Amazon for 10 years and has one of the bestselling liquid eye liners on the site.
There is no guarantee the world’s biggest beauty brands will join Amazon, or that some of the site’s current top sellers will stay. In fashion, where Amazon has made deeper inroads, the site still hasn’t signed many luxury labels (LVMH Chief Executive Bernard Arnault recently reiterated that brands like Louis Vuitton and Dior won’t join the site anytime soon). Birkenstock has criticised how Amazon works with vendors and in November, Nike ended its two-year-old relationship with the platform.
In an email, an Amazon spokeswoman said, “We want Amazon to be the best possible place for customers to discover and buy beauty products and we want to offer our brand partners an elegant and refined place to showcase their products to our over 300 million active customer accounts.”
Beauty brands looking to sell on Amazon need to enter the marketplace with their eyes wide open. They must find a way to make their products look appealing even as they are sold on crowded grids, sometimes side by side with cheap knockoffs, counterfeits or even expired items fished from the trash. High-end brands can have shop-in-shops on the Luxury Beauty vertical, but that means taking on Amazon as a wholesale partner.
Even so, those 300 million potential customers are tempting, particularly for small brands looking to reach a bigger audience. Some of them talked to BoF about how they’ve made selling on Amazon work.
Work the System
Rising to the top of customers’ searches is all-important on Amazon, which lists over 4,000 items in the lip gloss category alone, from Maybelline to Crayola. Small changes in a product’s name, its assigned category and how it is described can make a big difference in sales.
Stila noticed early on that “eye liner” appeared higher in searches than “eyeliner,” said Fisher, the brand’s CMO.
“Do your homework on how your competition is describing their products,” she said.
Brands also need to join events that have Amazon’s marketing muscle behind them. That’s especially true of Prime Day, when shoppers spent over $7 billion in a single 24-hour period last July. Erno Laszlo uses the date to acquire new customers, and saw sales increase by five times for Prime Day 2019 compared with the previous year, said Kristy Watson, chief marketing officer of the luxury skin-care brand.
“It takes a lot of collaboration months in advance in terms of planning everything from the product assortment, the pricing, the media,” said Elizabeth Johnson, assistant vice president of direct to consumer at L’Oréal, who oversees the Clarisonic brand on the site.
Many brands hire employees just to manage their Amazon business. That’s partly because, where most retailers have account managers and buyers to work with brands, Amazon runs mainly via an automated portal.
When Erno Laszlo started selling on Amazon, it was assigned a buyer who was managing 40 to 50 other brands, Watson said. Sales grew “significantly” after the label hired an employee to handle the marketplace, she said.
The Third-Party Marketplace
In the marketplace, Amazon takes an 8 percent referral fee on products that sell for $10 or less and 15 percent for more expensive items. That compares with selling inventory to wholesale retailers for 50 percent or more below the retail price.
The marketplace has other costs, however. Sellers are responsible for their own logistics, and must be able to ship orders in one or two days to qualify for Prime and get in front of more customers. They can also pay Amazon to handle fulfilment.
Getting into Amazon’s “buy box,” where featured products can be purchased with a single click, is key. Competition for that spot comes from third-party sellers, who get their products from a grey market that can include a brand’s own distributors. Perricone MD competes with up to 120 other sellers to get into the buy box. Even after hiring a company, iServe, to manage marketplace sales and send cease-and-desist letters to unauthorised vendors, the brand only gets the top slot about 20 percent of the time.
Sellers frequently undercut retail prices, and can pass off expired, damaged or fake goods in bottles featuring real (or real-looking) labels. Biologique Recherche even goes so far as to purchase bootleg products to get them off the site.
One seller, Stuff Central, offers Perricone’s Cold Plasma+ serum, which retails for $149 at Sephora, for just $84.83 on Amazon.
“Like others, mine arrived dried up, nearly empty,” one customer review reads. A representative from Stuff Central said in an email that it cannot be sure that customer’s serum even came from its inventory because of how Amazon fulfils orders.
They'll feature you and they really showcase the story of the brand.
“If a few sellers send to Amazon the same Perricone item, Amazon will spread them out into different locations and, dependent on location of the buyer, the item will be shipped from the closest location,” the representative said.
Amazon does help small brands stand out in its marketplace via its Indie Beauty programme. MZ Skin, a UK-based skin-care brand that sells a $410 night mask, was featured on Indie Beauty after entering Amazon last year.
“They do a lot to support you. They'll feature you and they really showcase the story of the brand,” said Shramona Dey, MZ Skin’s chief strategy officer.
MZ Skin entered the marketplace to grow its US business (it was already carried by retailers like Net-a-Porter and Bergdorf Goodman). However, the goal is to join the Luxury Beauty store, Dey said.
Perricone MD is exploring a launch with Luxury Beauty as well.
“My competition is using this as a platform and they're viewing it as an important channel,” said Robert Koerner, Perricone’s chief marketing officer.
My competition is using this as a platform and they're viewing it as an important channel.
Brands currently on Luxury Beauty said they can share preferred imagery and can offer plenty of information about their products, though Amazon’s options still lag what is possible on their own sites. Watson, of Erno Laszlo, said the luxe presentation helps drive positive reviews, a must to surface higher in Amazon search results.
Rahua, a clean hair-care line, began selling on Luxury Beauty two years ago. The brand, which also sells through upscale retailers like Harrods and Nordstrom, was seeing its image damaged by independent online sellers using unattractive pictures and bad copy, said co-founder Anna Ayers.
“It was to preserve our brand's image and to be sure that the customer is getting the true authentic product … the best experience and the correct information,” she said of the decision to join Amazon’s beauty store.
For Luxury Beauty brands, Amazon will take a more active role in shutting down third-party sellers, multiple brands told BoF.
The Amazon spokeswoman confirmed that “the authorised seller's experience is only open to luxury beauty brands we work with directly,” but declined to share specifically what that experience involves.
Be aware that the counterfeit sellers are a big issue.
Clarisonic was having issues with counterfeiters on Amazon before joining Luxury Beauty. Once it entered the store, it was able to work with Amazon to train the site’s algorithm to recognise and remove fakes. Amazon has a brand registry and a program called Project Zero to help identify and rid the site of counterfeits.
“Be aware that the counterfeit sellers are a big issue,” Clarisonic’s Johnson said. “Be ready to manage that proactively and partner with Amazon and lock arms to make sure that your brand and your consumers are protected.”
How Amazon’s Data Trove Will and Won’t Help
Amazon collects plenty of data about their customers’ purchases. They only share a portion of it with sellers.
“[Amazon] provides a lot of information to help build forecasts, but they're like the government. They know more about you than you do,” said Perricone’s Koerner.
Brands say Amazon’s geographic sales data, general traffic trends and popular search terms can be helpful for planning out ad buys and forecasting. But the site withholds data on how long customers have shopped for a specific brand on Amazon, repeat purchase behaviour and some demographic information.
They know more about you than you do.
Amazon can also potentially use the data it collects to produce beauty products of its own. The site has done this in other categories, including a sneaker introduced last year that bears a resemblance to Allbirds’ popular shoes.
Amazon launched a private-label skin-care brand, Belei, which is not a direct knockoff of any particular brand, but capitalises on broader trends in skin care like hyaluronic acid formulas and paraben-free messaging. Of course, Sephora and Ulta Beauty can use sales at their thousands of stores in the same way; Sephora Collection frequently takes inspiration from trendy products.
When Amazon was a niche beauty player, brands could safely ignore it. As the marketplace’s influence in the category grows, that’s no longer the case, said John Ghiorso, chief executive of Orca Pacific, an Amazon consulting agency that has worked with national beauty brands.
“Anyone who's selling to distributors is going to be all over Amazon, whether they work directly with Amazon or not,” he said. “What you're seeing now is more retailers realising they'd actually rather have the brand manage it directly than just have it be the Wild West.”
Editor's Note: This article was revised on 7th February 2020. An earlier version of this article stated that Amy Fisher is Stila's chief merchandising officer. She is the company's chief marketing officer.